Tunisair’s Outlook Brightens Amid Restructuring Exercise

 - February 18, 2019, 10:56 AM
A Tunisair Boeing 737-600 takes off from Zurich. (Flickr: Creative Commons (BY-SA) by BriYYZ)

Despite recent setbacks, North African carrier Tunisair remains cautiously optimistic about fleet expansion and passenger growth, as a near double-digit improvement in passenger numbers last year and a new government restructuring plan set for implementation in 2019 have improved its operating outlook. “The market is recovering and further progress is expected in the coming years. We estimate that in 2019, we will reach a target of 4 million passengers,” Tunisair CEO Ilyes Mnakbi told AIN.

At the end of December, the company operated 28 aircraft. The fleet includes two Airbus A330s, four A319s, 15 A320s, and seven Boeing 737-600s. “We expect to take delivery of five brand-new 320neos—two in 2020 and three in 2021,” he said. “We also intend to dry lease three additional mid-life aircraft in 2020 [two A320 ceos and one A330ceo] as a part of our fleet-expansion program. This year, Tunisair will conduct its new fleet plan study for the period 2022-2030.”

Management sees product diversification, especially through the launch of new routes into Africa, as vital to improving the airline’s overall outlook. Today, Tunisair’s network covers 55 destinations across four continents. “The airline's main focus in its strategic plan is to multiply flight frequencies from Tunis Carthage Airport, expand the African network, develop long-haul flights by adding more frequencies to Montreal, and [launch] the New York route,” he said. “We are also preparing for the implementation of Open Skies by the steady expansion of our network from Monastir and Djerba Airports, which host leisure and VFR [visiting friends and relatives] passengers.”

Passenger traffic rose last year to 3.82 million from 3.50 million in 2017, for an increase of 9 percent, while charter and hajj activities grew 18.7 percent. Europe ranked first among Tunisair’s markets, with a 68 percent share, followed by Africa (17.4 percent), the Middle East (13.1 percent), and North America (1.4 percent). Load factor increased fractionally last year to 74.5 percent, up only 0.1 percent.

Despite difficulties, Tunisair’s annual revenues rose 22 percent, to 1.57 billion Tunisian dinars ($368 million), at the end of 2018. Fuel expenditure jumped 51 percent to 430.2 million dinars. Tunisair’s debt stood at 1.065 billion dinars. “We are not expecting to make profits before 2021 and the finalization of the restructuring plan,” said Mnakbi.

The airline considers government support as vital to its progress. "Tunisair is my top priority," said Tunisian transport minister Hichem Ben Ahmed in a recent radio interview. He added that talks regarding an airline revamp with "the government and [other] social partners” would start this year.

Union-instigated public sector strikes have caused problems for the airline in recent years, particularly given the unsettled political environment Tunisia has continued to see as the progenitor of the "Arab Spring" movement in 2011. Average Tunisians complain the airline’s progress lags several years behind that of its Gulf competitors and that airport infrastructure throughout the country badly needs upgrading.

Tunisia’s longtime strongman, Zein Al Abdin Bin Ali, fled the country in 2011 after civil unrest made his position untenable, and political upheaval has stained its recent history. It suffered two major terrorist attacks in 2015, causing the death of more than 60 people, one involving an attack on tourists visiting the Bardo National Museum and a second at a hotel beachfront in Sousse. The International Monetary Fund forecasts real economic growth of 2.4 percent for its 11.7 million population in 2019.

Like all other airlines, Tunisair has felt the effects of the stiff competition imposed by European and Gulf rivals. “At Tunisair, we are not immune to the negative repercussions of our geopolitical environment,” Mnakbi said. “The flag carrier, since its creation, has gone through several crises that made us face enormous challenges that we have always, to date, managed to handle.”

The airline has taken several steps to overcome its problems, including optimizing its position as national leader for air traffic into and out of Tunisia, downsizing the group to boost productivity, improving motivation, developing training, and restoring discipline and a sense of ownership. Other steps have included modernization of management tools and information systems, austerity, and a plan to arrange early retirement for 1,200 agents in 2019.

“Efforts are being intensified this year to accelerate implementation of this recovery plan in order to improve productivity, adopt a new approach to governance, manage subsidiaries, improve revenues and, especially, reduce costs,” he concluded.